ACEABLE REAL ESTATE PRACTICE QUESTIONS (NC) PART 6

Rewrite this ad: "This three-floor walk-up is in an exclusive neighborhood just right for you and your family. Close to a beautiful Protestant church and several playgrounds. Enjoy our gated community (a security guard is present 24/7), and take a deep breath, knowing you're safe here."

"This three-floor walk-up is in a gorgeous neighborhood, close to several playgrounds. Enjoy our gated community, including such features as a security guard present every hour of the day." This rewrite takes out the implied religious bias, implied racism, and implied preference for families.

A married couple purchased a primary residence for $600,000. They lived there for seven years. In 2023, they sold the property for $1,000,000. How much profit will they owe capital gains tax on?

$0

A buyer purchases two discount points on a $500,000 loan for a primary residence. If the points meet the qualifications for points deducted in the year they were paid, what amount of money paid as points is deductible from their taxes, and when?

$10,000 is tax-deductible in the year the points were paid.

Elvira's Apartments is a gothic mansion that has been turned into a residential complex with 13 units. Each unit rents for $1,300 per month, and 10 of the units are occupied. What is the effective gross income for Elvira's Apartments this month?

$13,000

The capital gains exemption is:

$250,000 for people filing singly, $500,000 for people filing jointly

Iris bought a home for $300,000. She then spent $40,000 adding a new bathroom and new roof. Later, she sold the property for $600,000. She paid $20,000 in sales costs. What is her adjusted basis?

$340,000

The interest paid on mortgage loans for personal residences is tax-deductible up to __________ for people filing singly

$375,000

The interest on a loan to purchase a personal residence is tax-deductible up to what amount?

$375,000 filing singly, $750,000 filing jointly

The interest paid on mortgage loans for personal residences is tax-deductible up to __________ for people filing jointly

$750,000

Landlord Liam refuses to rent one of six apartments in his building to Jennifer, a Black woman who works as an IRS employee. Liam also lives in the building. What is TRUE of this situation?

-If Liam's refusal to rent to Jennifer is because of her sex, he is in violation of the Fair Housing Act of 1968, as amended in 1974. -If Liam's refusal to rent to Jennifer is because of her race, he is in violation of the Fair Housing Act of 1968, as well as the Civil Rights Act of 1866.

Who meets the criteria for disability?

-Jan, who is a recovering alcoholic -Al, who has AIDS -Caroline, who is developmentally delayed

Which of these people would pay capital gains tax on at least part of their capital gains?

-Lisette and Marie (filing jointly) made $300,000 in capital gains selling their primary residence. Marie used a capital gains exemption 18 months prior. -Luc made $50,000 in capital gains from selling an investment property. -Claudette (filing singly) made $100,000 in capital gains from selling the primary residence she purchased six months ago. -Emile (filing singly) made $300,000 in capital gains when selling his primary residence.

Consider the below individuals. According to federal law, who is considered disabled?

-a person who is visually impaired -a woman who has a history of severe mental illness -a man who uses hearing aids

Which property sale(s) does the Fair Housing Act cover?

-an undeveloped tract of land that will be used for a mixed development -a residential property -a condominium sale

Amani purchased a primary residence with a $275,000 loan. She later took out a $15,000 home equity loan to put in a new bathroom. Her property taxes are $2,950 annually. Which of these tax breaks is she likely to qualify for this year?

-home equity loan interest deduction -full real property tax deduction -mortgage interest deduction

Which of these are tax deductions, exclusions, or benefits that homeowners may qualify for?

-real property tax deduction -mortgage interest deduction -capital gains exemption -mortgage prepayment penalty deduction

Which of the following situations have special tax rules that apply to them?

-vacation properties -installment sales -home offices -1031 exchanges

Under the Fair Housing act, the Wilshire Estates has the right to exclude families with children. Who would be allowed to reside on the property?

Alice, who is 63

Tanya is a property manager. She learns that a disabled man, Greg, has bad credit, and declines to take his application for an apartment. Her decision is based on both his poor credit and his disability. What is TRUE of this situation?

Although Tanya is legally allowed to turn down applicants based on financial status, she is not allowed to do so based on disability.

Of the below, what is an example of blockbusting?

An agent tells white homeowners that people of another race are moving into the area and that property values are dropping.

Arnold lives in a duplex. He lives in Unit A and rents out Unit B. What are Arnold's obligations when it comes to fair housing?

Arnold does not need to comply with the Fair Housing Act.

An agent panic peddles.

BLOCKBUSTING

An agent tells white clients that property values are declining because of the influx of Hispanic residents.

BLOCKBUSTING

Betty is an agent. She is showing properties to a Jewish couple. They ask to be shown only houses near synagogues. What should Betty do?

Betty should say that she can't take this factor into account, and show them houses in a range of neighborhoods that match their other parameters.

dark-skinned

COLOR

light-skinned

COLOR

Of the below, which Act ruled that it is ALWAYS illegal to discriminate in housing based on race?

Civil Rights Act of 1866

According to North Carolina law, any lessor of residential real property or their agent who harasses any lessee or prospective lessee on the basis of sex is guilty of a:

Class 2 misdemeanor

upfront interest that a borrower prepays on their loan to lower their interest rate.

DISCOUNT POINTS

A real estate agent selling their own condo is exempt from the Fair Housing Act.

FALSE

interest only deductible if loan is used to buy, build, or improve property

HOME EQUITY LOAN INTEREST DEDUCTION

Under what circumstances can a landlord refuse to grant an accommodation or modification?

If it poses an undue financial burden, the landlord can refuse to grant a modification or accomodation.

How did the Civil Rights Act of 1866 affect real estate?

It prohibited discrimination in housing based on race or color.

deduct interest from loans up to $750,000 (filing jointly) or $375,000 (filing singly)

MORTGAGE INTEREST DEDUCTION

loan must be used to buy personal residence

MORTGAGE INTEREST DEDUCTION

Iranian

NATIONAL ORIGIN

Mexican

NATIONAL ORIGIN

An agent shows a prospect one home by a church, one home by a school, one home by a park, and one home by a shopping center.

NOT A VIOLATION

An agent tells a client that she cannot show him only homes in historically Asian neighborhoods.

NOT A VIOLATION

fees associated with getting a loan.

ORIGINATION POINTS

Which of the following statements is TRUE regarding operating budgets and operating statements?

Operating budgets plan for future operating expenses and operating statements report past expenses.

cost 1% of the value of the loan

POINTS

usually deductible in the year they're purchased, up to the $750,000/$375,000 total limit for all loans

POINTS

Which of these people would most likely qualify for the home office tax deduction?

Pierce is self-employed. His office is an extra room in his home that he works from exclusively, and it is not used for anything else.

Black

RACE

white

RACE

$10,000 total deductible between state income taxes, city income taxes, and real property taxes

REAL PROPERTY TAXES

A bank refuses to issue mortgages in a traditionally Hispanic neighborhood.

REDLINING

The Community Reinvestment Act and Home Mortgage Disclosure Act aim to prevent this.

REDLINING

Buddhist

RELIGION

Jewish

RELIGION

A property manager only shows a woman units in a building with mostly female residents.

STEERING

An agent tells a prospect that a certain neighborhood is "very diverse" and wiggles his eyebrows ominously.

STEERING

Patty, who lives in Raleigh, is selling her home on her own. (She is not a license holder.) In the ad, she states that she only wants to sell her home to fellow Christians. She refuses an offer from someone who is Jewish. Has Patty violated fair housing law?

Since the North Carolina Fair Housing Act has no exemptions for an owner selling their own home, Patty has violated state law. She has also violated the federal Fair Housing Act, as she used discriminatory advertising.

A mortgage prepayment penalty is tax-deductible.

TRUE

Any person who believes that they have been injured by the discriminatory practices of a real estate license holder has one year to file a complaint with HUD.

TRUE

A large apartment community has units available in multiple different buildings. When showing the property to prospective tenants who speak Spanish, the agent only shows units in a particular building where other families who speak Spanish live. The agent thinks it's a win-win: His clients, who are new to the country, will live nearby other people who speak the same language. What is TRUE of this situation?

The agent is steering within the apartment community.

A large apartment community has units available in multiple different buildings. When showing the property to prospective tenants who speak Spanish, the agent only shows units in a particular building where other families who speak Spanish live. The agent thinks it's a win-win: His clients, who are new to the country, will live nearby other people who speak the same language. What is TRUE of this situation?

The agent is steering within the apartment community.

A bank tells Sally, who is Black, that she is not qualified for a loan to buy a condo. Sally, suspicious, asks her white husband, who has very similar credit, to go in and make the same pitch for the same property. He is granted the loan. Evaluate this situation.

The bank is guilty of credit discrimination.

A property manager is talking to Bob, who wants to rent an apartment. Bob mentions that he has manic depression. The property manager thinks that dealing with an individual with this mental illness would be too much trouble. He directs Bob to another complex, saying that the complex is better suited to Bob's "needs." Evaluate this situation.

The property manager is refusing to rent to Bob due to Bob's disability. This violates the Fair Housing Act.

Which of the following is TRUE of individual building managers?

They are typically in charge of one larger property.

Sunshine Community is a condo community. Their policies state that no one under the age of 60 can live there. What is TRUE?

This prohibition may be legal.

An advertisement reads, "Active senior citizen community. No families with children under 10, please." Evaluate the ad.

Usually, terms like "no kids" are discriminatory advertising. But when advertising a specific senior community, the phrases are acceptable.

Jennifer, a property manager, is drafting some marketing materials for the apartment complex she manages. She recalls that real estate licensees must be very careful not to exclude or favor any protected classes. But do these rules apply to her as a property manager seeking tenants?

Yes! Discriminatory advertising would be illegal.

Married couple Julie and James sold their primary residence. They made capital gains of $450,000 on the sale. They've lived in the property as their primary residence for 13 months, and neither has used a capital gains exemption before. Will they be required to pay some capital gains tax on the sale? Why or why not?

Yes, because they haven't lived in the property as a primary residence for two of the past five years.

A property manager is showing a possible tenant around an apartment complex. The manager says, "I really don't think you can manage the stairs with that cane. Let's stick to just properties on the first floor, okay?" Is this discriminatory?

Yes. The property manager is steering the tenant on the basis of his disability.

Which of these vacation homes would most likely be treated as an investment property (NOT a personal residence) for tax purposes?

a beach house that the owner rents out most of the year and never stays in

What is the difference between a percentage fee and a flat fee?

a percentage fee is based on a property's income and a flat fee does not vary

To qualify for the mortgage interest deduction, a loan must be used to purchase what?

a personal residence

What is a cash reserve?

a portion of funds allocated to pay for variable expenses

Which of the following is NOT an example of someone who is likely to hire a property manager?

a retired agent with a lot of free time who owns one single-family residence rental property

Hilary asks that the property manager of her complex always call before anyone (like a maintenance worker) comes over, because she has severe anxiety around strangers. What is Hilary requesting?

an accommodation

In an installment sale (or contract for deed), when does the seller/financer pay taxes on their profit from the sale and financing interest?

as it is received (annually)

What must a rental rate set by a property manager do?

be enough to cover the operating expenses and yield a positive return on the investment

Why do most brokerages fall within the scope of the ADA, and, therefore, must be extra careful about accessibility?

because of their location or because they have 15 or more employees

Which of the following are NOT a part of a market analysis?

construction costs

The Federal Fair Housing Amendment Act of 1988 added which two protected classes?

disability and familial status

How is the net operating income determined?

effective gross income - operating expenses

Here's another true story. In Ohio, a woman was looking for an apartment with her one-year-old son. Two landlords told her they wouldn't rent to her because she had a young child. The first landlord claimed it was because there was an elderly person living in the building. The second landlord said, "Kids tear everything up." The woman who told the story added, "He acted like my precious son was a pet or something." The woman was discriminated against on the basis of:

familial status

What are the protected classes under the Fair Housing Act?

familial status, color, race, national origin, sex, disability, religion

Malia has experienced housing discrimination in Charlotte, North Carolina. What is her first step in bringing the incident to the attention of the correct authorities?

file a complaint with the North Carolina Human Rights Commission

Maude is a property manager. She is authorized to manage all of her owner's affairs within certain specified areas, like collecting rent and marketing her property. What type of agent is Maude?

general agent

The provisions of the ADA are MOST likely to apply to owners of:

grocery stores

Ralph wondered whether he had authority as the property manager for the strip mall to allow a local Girl Scouts troop to set up a cookie stand in the mall's parking lot. The property owner was traveling the world and would be unreachable for months. Where could Ralph look to find the answer to his question?

his property management agreement

Like-kind exchanges are used to avoid tax liability when disposing of what kind of property?

investment property

In order to take advantage of the tax benefits of owning property, like the mortgage interest deduction and deducting property taxes, homeowners must do what?

itemize their deductions

The property manager's primary duty is to:

maximize the owner's investment

The lessee is the:

party who leases a property

Which of these is likely to qualify as a capital improvement for tax purposes?

putting in a new bathroom putting in a new deck replacing a roof

A lender tells his new hire that as a bank, they have a policy of never giving loans to people who live in a certain neighborhood by the highway. What is this an example of?

redlining

You pull up a report that lists the number of units in a property, the names of its tenants, lease terms, rental income, and balances owed by tenants. What kind of report is this?

rent roll

Vincent only manages residential properties. He lives on-site at the apartment complex he manages under the employment of a real estate broker. Vincent is most likely a(n):

resident manager

How is the amount realized from a sale calculated?

subtract the cost of selling the property from the sale price

"Build-outs" is another name for:

tenant improvements

Wheelchair ramps to the state capitol building and grab-bars in public restrooms are in compliance with which federal law?

the Americans with Disabilities Act

Which law created the capital gains exemption for primary residences?

the Taxpayer Relief Act of 1997

Which of these is a property's basis?

the price a buyer paid for a property

A property manager's primary responsibility is to maximize:

the property owner's return on investment

Jerrica is a property manager for property owner Jillian's duplex. What is Jerrica's PRIMARY responsibility to Jillian in this relationship?

to realize the highest return possible and maximize the owner's return on that investment